Business Personal Property (BPP) insurance addresses the financial exposure a business faces when its owned property is damaged or destroyed by a covered peril. Most commercial leases require tenants to insure the property they bring into the space. Understanding BPP coverage helps business owners secure their operations against unexpected loss events.
Defining Business Personal Property (BPP)
BPP is defined as tangible property owned by the business that is used in the operation or conduct of that business. This property must belong to the entity named in the policy; items owned personally by employees or the owner are generally not included. This definition separates the property from the physical structure where the business operates. Standard BPP coverage is purchased either as part of a Business Owner’s Policy (BOP) or as a specific coverage form within a larger commercial property policy. The amount of coverage purchased is directly related to the total value of these movable assets.
What BPP Coverage Protects
BPP insurance is designed to protect a wide range of tangible assets that facilitate daily business operations.
Office Assets and Equipment
This protection includes standard office furniture and fixtures, such as desks, chairs, file cabinets, and shelving units used throughout the premises. The policy also extends to machinery and sophisticated equipment necessary for production or service delivery, covering high-value items like specialized manufacturing tools, commercial-grade servers, point-of-sale systems, and computer hardware used by employees.
Inventory and Supplies
Stock and inventory are covered under BPP, which includes all goods held for sale to customers. This encompasses raw materials waiting to be processed, work-in-progress inventory, and finished products ready for distribution. Materials and supplies, such as packaging, shipping containers, and general office consumables, are also included in the covered property.
Leasehold Improvements
BPP can sometimes protect leasehold improvements, provided they were paid for by the business tenant and not the landlord. These are fixtures or renovations that the tenant has added to the leased space, such as built-in cabinetry or specialized lighting, which are not permanently attached to the building structure itself.
Key Exclusions and Limitations
The most common exclusion is the physical building or structure itself, which falls under Commercial Real Estate or Building Coverage. Land, foundations, and underground pipes are also excluded from standard BPP coverage forms.
Vehicles licensed for use on public roads are excluded because their risks are addressed through a separate Commercial Auto policy. Money, securities, and valuable papers like deeds or bonds are typically excluded or have extremely low sub-limits, necessitating separate specialized insurance policies.
Property belonging to others, such as customers’ items left for repair, is generally not covered unless the business purchases a specific endorsement. Damage caused by natural perils like floods and earthquakes is universally excluded from standard BPP policies. Businesses operating in high-risk areas must purchase separate policies specifically designed to cover these catastrophic events.
Location and Valuation of BPP
Standard BPP policies primarily protect property located at the specific business address listed on the policy declarations page (the scheduled premises). Businesses must ensure that all operational locations are accurately listed to guarantee coverage applies.
Most policies offer limited extension coverage for BPP that is temporarily located off the named premises. This off-premises extension is subject to a specific sub-limit, often a small percentage of the total coverage limit. This provides protection for property while it is at a trade show, in transit to a client site, or temporarily stored at an unscheduled location.
Actual Cash Value (ACV)
When a covered loss occurs, the policy determines the payout amount using a method of valuation specified in the contract. The most basic method is Actual Cash Value (ACV), which calculates the replacement cost of the item minus depreciation based on its age and condition. ACV often results in a lower payout, leaving a gap between the insurance proceeds and the cost to purchase a new item.
Replacement Cost Value (RCV)
Replacement Cost Value (RCV) is the preferred valuation method for most businesses because it pays the full cost to replace the damaged property with a new item of similar kind and quality. Businesses typically pay a higher premium for RCV, recognizing its advantage in maintaining operational continuity.
Determining the Right Coverage Limits
Setting the correct coverage limit protects the business from being penalized for underinsurance after a major loss. The most important action is to create a comprehensive asset inventory list. This inventory should catalog every item that falls under the BPP definition, including its acquisition date and current replacement cost.
The limit calculation must be based on the Replacement Cost Value of all assets, not the book value or depreciated value used for accounting purposes. Using a lower, depreciated value for the coverage limit will activate a co-insurance penalty. This means the insurer will pay only a fraction of a partial loss, leaving the business responsible for a significant portion of the expense.
Businesses should regularly review and update their total BPP value, particularly after acquiring major new machinery or increasing inventory stock levels. Working with a professional commercial insurance agent helps ensure the valuation is accurate and that the policy limits reflect the true cost of rebuilding the business’s contents.